Conversion to Other Types of Tenancies

Issues Raised

130. Some consultees felt that converting small landholdings to
another tenancy type would remove the legal uncertainty small
landholders have been experiencing; it would introduce a right to
buy (if the type of tenancy that the landholding converted to had
an associated right to buy) and spread the burden in relation to
obligations.

131. Rationalisation of tenancy types may be advantageous in
terms of simplifying the agricultural landscape, however, it could
possibly result in disproportionate burdens being imposed on the
landlord where the rent does not reflect their obligations.

Conversion: Crofting

132. The part of the Highland region that was outwith the
crofting counties, Moray, the parishes of Kingarth, North Bute and
Rothesay in Argyll and Bute and the islands of Arran, Great
Cumbrae, Little Cumbrae in North Ayrshire became designated
crofting areas in 2010.
[104] The Crofters (Scotland) Act 1993 as amended by the Crofting
Reform etc Act 2007 and Crofting Reform (Scotland) Act 2010,
provides for small landholders to convert their holdings located in
these areas to crofting tenure, provided no part of the land is
tenanted by other means.
[105] The landlord need not agree. The process involves providing
proof of tenancy type by way of the Scottish Land Court, payment of
the agreed compensation to their landlord followed by a request to
the Crofting Commission for conversion to a croft. Small
Landholders, as new crofters, then have the right to buy their
croft.
[106]

Discussion

133. To date, no small landholder in one of the areas covered by
the 2010 Order has gone through the crofting conversion process.
During the consultation process, some individuals indicated this
was due to the complexity of the legislative process. In addition,
this poor uptake is attributed to small landholders not wishing to
sign up to the specific terms, rights and duties that apply to
crofts; there are regulatory burdens associated with crofting which
small landholders consider are excessive.
[107] Additionally, they may be deterred by a possible decrease in
land value as a result of conversion,
[108] the cost implications in relation to valuations.

134. If the possibility of converting to a croft was extended to
all small landholdings, crofting would then apply to the whole of
Scotland and geographical jurisdiction of the Crofting Commission
would extend to the whole country; historic crofting counties could
become obsolete. In addition, extending the crofting regions may
result in increased numbers of applicants accessing crofting
grants. Such a change would require support from all aspects of the
crofting sector and the Scottish public given the cultural
significance of crofting.

135. Small landholders on Arran can already convert to crofting,
however, they have indicated that the process appears complex.

136. As part of this review, the opinions of small landholders
were canvassed on the possibility of converting to crofts. Their
responses were mixed. Some suggested that although conversion would
mean that small landholders would have the right to buy for the
first time, allowing access to funding that has previously been
unavailable to them, conversion to crofting would be as a last
resort. Some consultees indicated that any further advantages would
have to be made very evident to them, especially in relation to
their perception of crofting being too bureaucratic with little
clarity on rights and conditions.

137. A further barrier to conversion may be the payment of
compensation by the small landholder to the landlord. Some small
landholders considered that, where small landholdings had
automatically converted to crofts under the 1955 Act these
individuals were not required to pay compensation. They also felt
that the sale value of the land would not be calculated to reflect
the their personal long term investment. They also argued that it
was potentially possible that compensation in the form of tax
breaks or direct payment could have been paid to landlords at the
time that certain small landholdings were originally formed.

138. However some small landholders felt that having a governing
body such as the Crofting Commission would be advantageous, helping
ensure that both small landholders and landlords adhered either to
the legislation or to a code of conduct.

139. The Scottish Parliament's Rural Economy and Connectivity (
REC)
Committee has considered small landholding conversion to crofting
on two occasions recently. Whilst the Crofting Commission appear to
be open to the idea of encompassing small landholdings within
crofting tenure, it was reported that small landholders were
generally against the idea of crofting law applying to them.
[109]

Conversion: Secure 1991 Act Tenancy

140. Another option would be to allow a small landholding to
convert into a secure 1991 Act agricultural tenancy. However,
consultation responses indicate that conversion to this type of
tenancy would not be an attractive option for small landholders as
they felt agricultural holdings legislation was complex.

Legislation

141. No legislation currently exists to allow small landholding
to convert into an agricultural holding.

Discussion

142. Conversion to secure 1991 Act agricultural tenancies could
help improve clarity of the rules applying to those small
landholdings which are converted. However, there would be
significant implications for landlords and these would have to be
carefully considered. Landlords would no longer be required to
apply to Scottish Land Court to serve notice to quit on the small
landholder. There may be potential for a higher rental income as a
result of a conversion.

143. The small landholder would still benefit from security of
tenure and would no longer be responsible for providing or for
replacement and renewal of all fixed equipment. In addition, they
would be able to benefit from a pre-emptive right to buy the land
leased under the converted secure 1991 Act agricultural tenancy and
could potentially benefit from the legislative requirements around
fixed equipment and improvements at waygo.

144. Such a change would require support from tenant farming and
across the Scottish agricultural sector and consideration would
also require to be given to the legal impacts upon small
landholders and their landlords.

(A table comparing the legal differences between small
landholdings, crofting, & secure 1991 Act tenancies can be seen
at
Annex
4).